Definition ∞ Algorithmic liquidations are automated processes within decentralized finance (DeFi) protocols that sell collateral when a borrower’s loan position falls below a predetermined health ratio. These operations are executed by smart contracts or bots to maintain the solvency of lending platforms. The process is typically triggered by price movements of the collateral asset, ensuring lenders are protected from losses. They function without human intervention, relying on predefined rules.
Context ∞ Algorithmic liquidations are a frequent topic in crypto news, especially during periods of high market volatility, as they can accelerate price declines. Debates often center on the efficiency, fairness, and potential for market manipulation inherent in these automated systems. Monitoring liquidation volumes provides insight into market stress and the risk exposure of DeFi users.
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